Protectionism ‘damaging international trade flows’

World leaders have warned of a new wave of protectionism, hampering international trade and destroying jobs. In the finalweekend of the World Economic Forum (WEF) in Davos, Switzerland, Gordon Brown said: “There is implicit protectionism. I’m afraid of what is happening at the moment.”

The Prime Minister is especiallyconcerned about the withdrawal of lending by Western banks to emerging markets.

Others echoed that fear and added that traditional methods of protection – tariffs, quotas anddiscriminatory rules – were also returning.

Pascal Lamy, director-general of theWorld Trade Organisation (WTO), said he could detect “a few spots on our radar screen”. “Trade is already a casualty of this recession,” he said.

“We are witnessing a huge drop in trade flows, which in turn generates unemployment… And, of course, the hit is the hardest on developing countries.”

MrLamy said the WTO would present a report on protectionist trends to the G20 meeting to behostedby Mr Brown at Downing Street in April. “We will confront them”, he said, with the reality of the situation.

Immediate concerns centre on the “Buy American” clauses in Barack Obama’s $819bn (£561bn) fiscal stimulus package.

These have been inserted by the House of Representatives and require infrastructural spending to use US steel. These provisions will be subject to the agreement of the Senate and the White House, which has said it is “reviewing” them.

TheGermanChancellor, Angela Merkel, earlier explicitly criticised the separate rescue package for the US carmakers.

“I am very wary of seeing subsidies injected into the US auto industry... That could lead to distortion and frankly constitute protectionism,” she said.

India’s Trade minister, Kamal Nath, warned that the country saw growing signs of protectionismandwould respond with its own measures if its exporters were threatened.

“We do fear this because one must recognise that at the heart of globalisation lies global competitiveness, and if governments are going to protect their non-competitive production facilities it’s not going to be fair trade,” he said.

“If there are protectionist measures India will be compelled to also take commensurate measures against those countries which will be good for no one.”

India has raised tariffs on steel toprotect local producers, which will hit China hardest. India is said not to regard China as a fully functioning market economy.

For his part, the Chinese Premier Wen Jiabao warned in his address to the WEF that protectionism would only deepen and prolong the crisis.

MrLamy said he recognised the intense political pressures facing governments. The EuropeanUnion Trade Commissioner, Baroness Ashton, who has served in Mr Brown’s government, added that the Prime Minister’s comments about “British jobs for British workers” had been taken out of context. She said that legislators, including those of Capitol Hill, will need education about the benefits of free trade and the completion of the current Doha round of world trade talks.